U.S. Aerospace Protests KC-X Source Selection

By Amy Butler abutler@aviationweek.com

The Pentagon is assessing only two bids for the U.S. Air Force KC-135 replacement competition because a last-minute proposal from U.S. Aerospace/Antonov was not received before the deadline, according to Geoff Morrell, Pentagon press secretary.

This has sparked a protest from U.S. Aerospace filed Aug. 2 with the U.S. Government Accountability Office (GAO). Company officials say that the “conduct of the Air Force was unreasonable,” among other complaints, according to an industry executive. They claim that personnel at the Aeronautical Systems Center at Wright-Patterson AFB, Ohio, where the KC-X program office is located, discriminated against their bid.

Bids for the KC-X competition, estimated to be worth about $35 billion for 179 tankers, were due at 2 p.m. July 9 local time at Wright-Patterson AFB, Ohio (which is in the Eastern time zone). EADS submitted its proposal a day early, and dispatched two copies — one by air and one by ground — to be sure it arrived. Boeing’s submission was received at around 9 a.m. July 9, according to Morrell. “Those deadlines count,” he says. “They mean something. They are there for a reason and any professional contractor knows that.” Both EADS and Boeing said their proposals were more than 8,000 pages in length.

According to an industry executive, a messenger carrying a bid from U.S. Aerospace arrived at the Wright-Patterson gate at about 1:30 p.m., 30 minutes before the deadline. “Air Force personnel intentionally denied the messenger entry to the base” and later provided “incorrect directions,” and forced the messenger to wait when he got turned around. The proposal was marked 2:05 p.m., but this executive says that the bid was under Air Force control prior to that time

Morrell, however, stands by the Pentagon’s view that the proposal was not received on time. “This is a $30-40 billion bid,” he says. “This is not a high school homework assignment. Deadlines count here.”

U.S. Aerospace/Antonov had requested an extension to the proposal due date, but that was declined by the Pentagon. On March 31, the Defense Department had already extended the deadline by 60 days to provide time for EADS to prepare its bid. Its longtime teaming arrangement with former prime contractor Northrop Grumman ended abruptly in March, forcing the company to step up in the prime role at the last minute.

“The proposal was late and by law we are not allowed to consider it,” Morrell said in response to a query from AVIATION WEEK. “We are considering two proposals and U.S. Aerospace is not one of those being considered.”

Chuck Arnold, a senior advisor to U.S. Aerospace, says the company is proposing an An-112 concept based on the four-engine An-70 transport. The design features a boom capable of offloading 1,600 gal. per minute (more than the 1,200 gal. per minute required by the Air Force), and he boasts that it would be far less expensive than the Boeing 767-based design or the EADS A330-200 tanker platform.

Arnold declined to identify the boom manufacturer or any U.S. partners other than U.S. Aerospace, a small firm based in Southern California that was to be prime; he citied a nondisclosure agreement with Antonov. Antonov is a state-owned manufacturer in the Ukraine, but Arnold insisted, without providing details, that some assembly of the tankers would take place in the United States.

The eleventh-hour emergence of the U.S. Aerospace/Antonov bid sparked many questions. U.S. Aerospace is a small company; in Securities and Exchange Commission (SEC) filings the company has listed about 30 employees. It is not clear how such a small contractor would be able to manage a massive contract and supply chain, though Arnold touts the small company size as a benefit in lean management.

Additionally, the company has recently had financial problems, including debt. Arnold notes that board members recently secured an influx of funding to “clean up the books,” but this, too, calls into question the ability of the firm to manage a major Defense Department contract. A July 1 SEC filing notes additional cash on hand.

A new board of directors took over the company in March, renaming it from New Century to U.S. Aerospace and shifting the focus to address only aerospace products.

However, the company seemed even in its July 1 SEC filing to be aware that it may not meet the requirements called for by the Air Force. To compete in KC-X, each bidder must meet 372 mandatory requirements and demonstrate its ability to manage the contract. The Pentagon’s denial for the bid extension was “resulting in a significantly more rushed process than we desired, and substantially hindering our ability to submit a full and complete bid package,” according to the July 1 SEC filing from U.S. Aerospace. “The Air Force may find that our proposal does not meet all mandatory RFP requirement, that we do not have qualified subcontractors and teaming partners, that we are not a capable and responsible contractor, that we have not obtained or processed the classified information that is needed to prepare a proposal, that we have not demonstrated that the company has the facility and personnel clearances that are prerequisites to receiving, handling and storing classified information, and that our failure to meet the proposal submittal deadline was attributable to our failure to act diligently and promptly.”

Arnold says that “If our plane is looked at, we will be selected,” adding that he expects “obstacles” for the company in competing.

The Air Force’s tanker pursuits have been years in the making. A 2002 attempt by the service to lease Boeing 767 tankers crumbled after Sen. John McCain (R-Ariz.) found bloated pricing and began an investigation that eventually led to jail time for former senior Air Force procurement official Darleen Druyun and former Boeing Chief Financial Office Michael Sears.

A later competition won by Northrop Grumman/EADS was thrown out after a Boeing protest uncovered missteps by the Air Force during the source selection process. More recently, Defense Secretary Robert Gates himself stepped in last year to table a new competition; he called for a “cooling off” period between the contractors.

The current competition is the Air Force’s most recent attempt to replacing aging KC-135s. A downselect is expected in November shortly after the national elections.

http://www.aviationweek.com/aw/generic/story.jsp?id=news/awx/2010/08/04/awx_08_0...

The Government Accountability Office is now reviewing the Aug. 2 protest filed by US. Aerospace/Antonov.

The company is claiming it was unfairly shut out of the competition. And, the crux of this argument will likely boil down to the type of discussion that former President Bill Clinton had when he said "it depends on what the definition of 'is' is."

At issue is when USAF took control of the proposal documents submitted by U.S. Aerospace. All of the following detail was provide from an industry executive who wished to be anonymous due to the sensitivity of the issue.

The company claims its messenger, which was delivering the proposal was at the Wright-Patterson Area B gate before 1:30 p.m. July 9. The deadline was 2 p.m. that day.

According to the company, Air Force personnel at the gate "initially denied the messenger entry to the base, then gave incorrect direction to the 1755 Eleventh Street Building 570," where the proposal was headed. The messenger apparently became lost, and Air Force personnel told him to wait while they came to him.

By the time the papers reached their destination, the Air Force stamped the proposal as being received at 2:05 p.m.

U.S. Aerospace was notified July 22 via a letter from the Aeronautical Systems Center at Wright-Patt that the company's bid was late and would not be considered as part of the source selection.

So, one of the questions that is likely to be addressed as GAO reviews the protest is at what point the USAF had "control" over the proposal.

Was it when the messenger stepped onto the base? I'd suspect that when it comes to matters of security, the Air Force would say its personnel have control over all people on their bases. When it comes to a contracting matter, it may be different.

Apparently, Air Force officials subsequently told a company representative that delays at installation gates are common (and they are -- I've been subject to more than a few), and that the company should have anticipated this potential snag and planned appropriately.

But, the U.S. Aerospace argument is that Air Force personnel "intentionally delayed the messenger from delivering the proposal in order to create a pretext for refusing to consider it because they have political issues" with the principal supplier, Ukrainian state owned Antonov, according to the industry executive.

If this is proven to be true, it will bring the KC-X competition and the entire U.S. Air Force acquisition system to its knees after and already rough decade of missteps and scandals.

Another issue likely to arise during the review process is whether the Air Force was responsive to requests from U.S. Aerospace to the classified documents required to provide a fully compliant bid.

The U.S. Aerospace argument is that the Air Force took a week or more to provide the documentation required for the company to respond to its bid. The Air Force, however, has a rigid process for such communications and asked the company to resubmit its request through an official process channel. The net result was that the company had less time to review the materials and respond to the RFP.

On this matter, the Air Force is likely to argue that the processes for bidders are set -- as laid out in the FAR -- and the service is unable to budge from them.

http://www.aviationweek.com/aw/blogs/defense/index.jsp?plckController=Blog&plckB...

The Air Force boys just better take really good care of those old KC-135s.  At this rate they will be around for a long time to come.

DaveSims wrote on Jul 8^th, 2010 at 9:43pm:


No they don't, the airframe this is allegedly based on is effectively a twin turbofan version of the AN-70 - and we know how well that programme has gone. I suspect the credibility of this bid is close to zero.

Large strategic transport designed for oversized cargo tend not to make great tankers.

Ivan wrote on Aug 8^th, 2010 at 5:26pm:


The only way that 747 could still be refueling F-14s would be in Iran, or parked next to one in the desert.

The year 1974 marked the first flight of the KC-747. A total of three were made, and possibly one remains in service, Outfitted with a KC-135 boom, the first 747 ever made was modified as a test bed for proximity tests and aerial refueling equipment integration. The Imperial Iranian AF bought 12 used 747s to be modified for military applications, three of which were configured as tankers. During exercise Midlink 77 Oct-Dec 1977, 50th Tactical Fighter Wing F-4 crews became the first in the USAF to be refueled by a KC-747 of the Imperial Iranian Air Force
.